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a Parent’s Guide to
Raising Money-Smartkids
A U T H O R
R o b i n Ta u b , C A
I L L U S T R A T O R
F a r i d a Z a m a n
i i i
FOR EWOR D
! e Canadian Institute of Chartered Accountants recently commissioned research about the level of " nancial literacy in Canada, and the results — consistent with the research and recommendations of the Federal Task Force on Financial Literacy —were a wake-up call: Canadians need to improve their " nancial literacy skills!
If you are like most Canadians, you believe that responsible money management is an important life skill — and one that should be taught to kids. ! e research shows that most parents feel it’s their responsibility to teach their kids about money management, and many have tried. But a vast majority of parents feel they have not been very successful at it. ! ey feel they don’t have the information they need, and they don’t know how to approach the subject with kids of di# erent ages. ! ey recognize that they need help and they are willing to listen and learn. ! at’s why this book was written. We believe that the earlier kids are taught, the greater the likelihood of their " nancial success throughout life.
As chartered accountants, we know about money. We hope this book will give you the information and skills you need to communicate e# ectively with your children about important money matters. We hope that it will also make you more aware of your own behaviour around money and the type of " nancial role model you are to your kids currently — and the type of role model you can become. It may also lead to improvements in your own " nancial health as you become more skilled in understanding, practising, and explaining money management. Finally, we hopeit will help your kids feel more con" dent about their " nancial decisions.
Kevin Dancey, FCAPresident & CEO! e Canadian Institute of Chartered Accountants
1C H A P T E R
“Dad, how much money do you make?”
Getting to Money Smart
v
TA BLE OF CONTENTS
FOR EWOR D iii
INTRODUCTION xi
CH A PTER 1: GETTING TO MONEY SM A RTW hy Is It Important to Raise Money-Smart Kids? 2
W hat Are the Challenges to Raising Money-Smart Kids? 3
W hat Kind of Financia l Role Model Are You? 4
Is Money a Taboo Topic in Your Home? 4
! e Big Picture: Household Finances 5Budgeting: Overhead expenses and discretionary spending 5Closing a " nancial gap 7
How Your Values Inf luence Your Financia l Decisions 8
The Ten Healthy Habits of Financia l Management 9
Key Points 15
Resources:
Role Model Self-Assessment 16
Cash Flow Calculator 17
RRSP Net Worth Worksheet 19
Values Validator 22
C H A P T E R
2
“Mommy, I know money doesn’t grow on trees — it comes from the bank machine!”
Teaching Young Children
A P A R E N T ’ S G U I D E T O R A I S I N G M O N E Y ! S M A R T K I D S
vi
CH A PTER 2: TE ACHING YOUNG CHILDR ENEarn 26
What is Money? 26Bills and coins 26Barter 27Foreign currencies 28! e value of a dollar 28
Where Does Money Come From?(No, the answer is not the ATM machine!) 29
Birthday and Tooth Fairy Money 30
Allowance: Payment for Chores, a Money Management Tool, or Both? 31When do I start and how much do I give? 32Limitations or laissez-faire? 32
Save 32
Multi-Slotted Piggy Banks 33
Spend 34
Teachable Moments 34At the grocery or corner store 34At the mall 34At the restaurant 35Planning a birthday party 35Board games 36
Share 36
Get a Gift/Give a Gift 36
Donating Change for a Charity — It Adds Up! 37
C H A P T E R
3
Teaching Pre-Teens
vi i
T A B L E O F C O N T E N T S
Invest 37
Encouraging Entrepreneurship — Beyond the “Lemonade Stand” 37
Key Points 38
CH A PTER 3: TE ACHING PR E!TEENSEarn 40
Jobs: Babysitting, Dog Walking, Car Washing and Other Odd Jobs 40
Allowance Revisited: Payment for Chores, A Money Management Toolor Both? 41
Know what motivates your kid 41How much allowance to give? 42Limitations or laissez-faire 43
Save 43
Piggy Banks to Real Banks 43
Matching Savings 44
Chequing Accounts 44
A Story about Setting Goals 45
Spend 46
Getting Out in the World 46Spending their own money vs. yours 46Media and advertising 47Brand names and peer pressure 47Cell phones 48
More Teachable Moments 49
Debit and Credit Cards 50
Virtual Spending: iTunes, eBay, etc.: How Do You Make the SpendingFeel Real? 50
C H A P T E R
4
“Thanks, man!”
Teaching Teenagers
A P A R E N T ’ S G U I D E T O R A I S I N G M O N E Y ! S M A R T K I D S
vii i
Share 51
Fostering an Attitude of Gratitude 51Helping those less fortunate 51
Invest 52
Cash! ow 101, the Board Game — Monopoly on Steroids! 52
Entrepreneurship Revisited 52
Key Points 53
CH A PTER 4: TE ACHING TEENAGER SEarn 56
" eir First “Real” Job 56
Helping " em Understand " eir Pay Cheque 57
Paying for Good Grades 58
Online Consignment Sales 59
Save 60
Cash is King 60
Using Personal Values to Set SMART Goals 61
Emma Taylor’s Goal-Setting Worksheet 62
Paying " emselves First — and Making It Automatic 63
Spend 63
Allowance: Increased Financial Responsibility 63
Budgeting 64
Tracking Spending 65
Needs vs. Wants Again 66
An Ecological Approach to Financial Responsibility 67
Spending Wisely 67
C H A P T E R
5
“It’s like totally delicious — wait till you try it. And it only costs $5.95.”
Teaching Emerging Adults
ix
T A B L E O F C O N T E N T S
Stored Value Cards 68
Negotiating and Bargaining 68
Tipping 68
Share 68
Raising Money At School 68
Raising Money For School 69
Invest 70
Investing for Short- and Medium-Term Goals 70
Simple vs. Compound Interest 71
Key Points 74
Resources
Teen Budget Template 75
Goal-Setting Worksheet 76
CH A PTER 5: TE ACHING EMERGING A DULTSEarn 79
Why File a Tax Return? 79
Tax Breaks for Students 80
Scholarships and Bursaries 80
Save 81
Tax-Advantaged Savings 81Tax-Free Savings Account (TFSA) 81Registered Retirement Savings Plan (RRSP) 82
! e “Latte Factor®” 82
A P A R E N T ’ S G U I D E T O R A I S I N G M O N E Y ! S M A R T K I D S
x
Spend 83
Paying for Post-Secondary Education 83
Is Your Kid Prepared To Be On Her Own? 84
Credit Cards Revisited 85
Fraud, Scams and Identity ! eft 87Preventing identity theft 87Preventing credit or debit card fraud 87A note about social media 87
Share 88
Volunteering Your Time 88
Philanthropy is a Family A" air 89
Invest 89
Long-Term Investing: Start Early and Invest Regularly 89
Stocks, Bonds and Other Investments 90
! e Bene# ts of Diversi# cation 91
Asset Allocation and Security Selection 91A tale of three investors 92
Key Points 94
Resources
Post-Secondary Student Budget 95
R ESOURCES 99
A BOUT THE AUTHOR 103
ACK NOW LEDGEMENTS 104
xi
INTRODUCTIONTo get the most out of your reading, you should understand a few things about how the book is organized. ! e " rst chapter sets the stage, explaining why it’s important to help your kids become money-smart. It also covers what that implies about your own responsibility to be smart with your money so that you can teach by example, because a good example really is the best teacher.
But beyond your own example there is the very basic need to talk to your kids about money. How do you approach it? We’ve given a lot of thought to this question, and the conclusion we’ve reached is that there are really " ve basic aspects of money that can be used to structure an ongoing conversation. First there’s the fact that in order to have money you have to earn it. ! en, once you’ve earned it, there are really just four things to do with it:• Save• Spend• Share• Invest.
Chapters 2 through 5 are directed to parents with kids at di# erent stages — young children (5 to 8 years old), pre-teens (9 to 12 years old), teens (13 to 17 years old), and emerging adults (18 to 21 years old). Each chapter is organized around the " ve aspects of money just discussed — Earn, Save, Spend, Share and Invest. ! ere are suggestions for family discussions and activities designed to reinforce these concepts. Each chapter also contains quotes from parents talking about how they approached " nancial literacy with their kids, quotes that sometimes remind us that there is often humour even in the most serious topics.
We hope that the suggestions in this book, and the real-life experiences of other par-ents, will make your conversations with your kids easier and more e# ective. We also welcome your ideas and anecdotes. Please email us at: moneysmartkids@cica.ca
for a copy of this book
please contact
Dan Muzzin, CA
Macdonald Realty Ltd.
call 604-813-3795
email to dan@danmuzzin.com
www.danmuzzin.com
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